Steve Case invests in
car-rental venture

The co-founder of AOL is backing Flexcar,
one of the first so-called car-sharing companies

Steve Case, co-founder of America Online Inc., has bought a majority stake in Mobility Inc.'s Flexcar, one of the first car-sharing companies in the United States.

Case said he invested an undisclosed amount in the Seattle-based company through his $500 million Revolution LLC investment fund, which focuses on lifestyle, health and resort businesses. Former Chrysler Chief Executive Lee Iacocca also will invest and join the board, Case said yesterday in a phone interview.

Retail gasoline prices have gained 35 percent in the past year, helping car-sharing services catch on in U.S. cities including Seattle, Washington, D.C., and Los Angeles. Flexcar and its Boston-based rival, Zipcar Inc., both say they're signing twice as many members as a year ago.

Zipcar claims 45,000 members, while Flexcar says it has 35,000.

Car-share customers pay a fee to rent vehicles for as little as a half-hour. The cars are parked in neighborhoods or near a transit hub. Users reserve vehicles online or by phone, and use electronic cards to access them. They must then return the cars to reserved spots.

Revolution "is really trying to get people to think about a different approach, whether it be healthier choices in what they eat, in terms of fitness or other ways to lead a simpler or more fulfilling life," Case said. "This is another option."

Case, 47, said he got interested in Flexcar four months ago while walking past one of its parking spots at 17th and O streets, near Revolution's offices in Washington. He used the service several times to reach meetings around the city.

Co-founding America Online in 1985, Case helped it become the biggest U.S. Internet service provider. After leading AOL's acquisition of Time Warner Inc. for $124 billion in 2001, forming AOL Time Warner Inc., Case stepped down as chairman of the combined company in 2003. The board voted to drop AOL from the company's name in September 2003, reflecting investment disappointment at its slumping shares.

Case's investment will help Flexcar expand, according to the CEO of the 6-year-old company, Lance Ayrault. Within five years Flexcar expects to have 1 million members and a fleet of 20,000 cars, up from 450 today. The company isn't yet profitable, said Ayrault, 44.

About 25 percent of Flexcar's members are businesses, including Seattle-based Starbucks Corp. and law firm Perkins Coie LLP, which isn't replacing some cars in its motor pool.

"As the cars died, we just got rid of them and put more emphasis on using Flexcar," said Perkins Coie operations director Rick Meyer, 58. "The insurance and parking costs were killing us."

Zipcar received $10 million in July from Menlo-Park, Calif.-based Benchmark Capital.

Flexcar's customers in Seattle pay an hourly fee of $9. Many of Flexcar's cars are Honda Motor Co.'s Civic hybrids, which can travel as far as 51 miles on a gallon of gas and produce less pollution by running on a gasoline-powered engine with an electric motor.

"The idea that maybe you don't have to own a car if you only need one occasionally may catch on, just like time-sharing caught on in real estate," Case said.

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